For years now, a dubious arrangement has existed where mutual fund managers would pay the brokerage firm that sells the product a fee for making distributions to customers. Critics have warned that the arrangement would encourage brokerages to sell products that would pay out the most and thus earn the most fees. But new rules that are forthcoming from the Labor Department has some wondering if this practice is a soon to be a thing of the past. The expected new rules will force those that offer financial advice to act in a fiduciary like manner in regards to consumers. This would mean disclosing the fees they receive for making distributions which can siphon away a significant amount of money that would otherwise go to the fund holder. Critics of the fee arrangement have wholeheartedly supported the proposed change but many have expressed skepticism anything will change. They point to the fact that the fees usually have little influence on what funds are offered since the individual broker is unlikely to benefit in anyway from the distribution fee paid to the corporate broker. In any case, it will only be once the new rules are issued that the financial planning community will know the true future of the fee.
See Jason Zweig, Mutual Fund Fees: A Bad Incentive Fades Away, The Wall Street Journal, February 26, 2016.
